 "GMR, partner win $700-mn Philippine airport project")
The publicly listed company, with its head office in this city, is presently trying to shed some key assets across its airport, energy and highways divisions, to reduce its debt load. Hence, the Philippine development is welcome news.
It is partnering Philippines-based Megawide Construction Corporation in a 40:60 joint venture. On Thursday, the companies said they’d won the bid to modernise Mactan-Cebu International Airport, in central Philippines.
It is understood that the Megawide-GMR consortium won the bid by a slender margin over another consortium in which Singapore's Changi Airports was a part.
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Sidharath Kapur, chief financial officer, GMR Airports, told Business Standard: “This a 25-year concession agreement which involves an upfront payment of $375 million to the Government of Philippines. Post that, there is no revenue share with the government. In addition to this upfront payment, we have outlined $325 million as construction cost to expand the capacity of the airport to 16 mn passengers from the current five million over a four-year time frame.”
He said the $375-million upfront payment would would be met from a 70:30 debt to equity ratio and so, too, for the project cost. Work would start late next year.
“As part of this project, we expect our (GMR) equity contribution to be in the range of $40-45 mn,” he added.
GMR is highly-leveraged and is looking to sell its airport project in Istanbul, as well as exiting a power project in India with 600 Mw generation capacity. There have also been recent reports that GMR, which owns the Delhi Daredevils cricket team in the Indian Premier League, is in discussion with L N Mittal of Mittal Steels to offload a significant stake in the team.
GMR has over the past year been trying to work towards what it terms an ‘asset light-asset right’ strategy.
Meaning, it is looking at an entire spectrum of assets for possible sale to raise and recycle cash. The company has debt of close to Rs 40,000 crore and with a leverage of 3.5 times. It has so far divested two highway projects, a power project in Singapore and a coal mining asset in South Africa, which freed about Rs 4,000 crore of funds for re-investment.
Senior officials of GMR Infra indicated they were working towards a public offer of its airport assets — three, at the moment, at New Delhi, Hyderabad and Istanbul. The officials said they were working with bankers, including Citigroup and JPMorgan, to manage the intended public offer, the timing of which is yet to be decided. It is learnt GMR would push for a listing during the first half of 2014-15, expected to provide a decent exit to a clutch of private equity investors in GMR Airports.
As part of this, GMR recently redid its holding in the airports holding arm, to consolidate a complex web of stake shares under GMR Airports Holdings.
The airports vertical contributes as much as 60 per cent of the overall revenue of close to Rs 10,000 crore a year. Infrastructure has been the only profitable vertical for GMR, mainly driven by implementing the increased charges at New Delhi International Airport.
The stock of GMR Infra gained 1.4 per cent on Thursday, to close at Rs 22.20 a share on the National Stock Exchange.